All posts tagged corruption

Since 2008, Avon has been grappling with a lengthy investigation into corrupt practices in some of its international operations The company’s internal probe led to heads rolling, and after notifying the Department of Justice and SEC of the investigation, it has been working on a settlement that will involve paying large fine.

How large? That’s a big question for Avon, which said in a filing today that authorities may push for a much larger penalty than the company had previously been banking on (emphasis ours):

“As previously reported in our Quarterly Report on Form 10-Q for the period ending June 30, 2013, we made an offer of settlement to the DOJ and the SEC in June 2013 that, among other terms, would have included payment of monetary penalties of approximately $12 [million]. Although our offer was rejected by the DOJ and the staff of the SEC, we accrued the amount of our offer in the second quarter of 2013.

In September 2013, the staff of the SEC proposed terms of potential settlement that included monetary penalties of a magnitude significantly greater than our earlier offer. We disagree with the SEC staff’s assumptions and the methodology used in its calculations and believe that monetary penalties at the level proposed by the SEC staff are not warranted. We anticipate that the DOJ also will propose terms of potential settlement, although they have not yet done so and we are unable to predict the timing or terms of any such proposal. If the DOJ’s offer is comparable to the SEC’s offer and if the Company were to enter into settlements with the SEC and the DOJ at such levels, we believe that the Company’s earnings, cash flows, liquidity, financial condition and ongoing business would be materially adversely impacted.”

What happens in Vegas might stay in Vegas, but fraud and corruption overseas are no joke for big U.S. businesses. Regulators are pledging a tough line on bad business practice abroad, and companies themselves are facing increasing costs to clean up messes caused by their overseas units.

Expect those kind of messes to continue, given a study released today by Ernst & Young, which surveyed over 3,000 board members, managers and their teams in Europe, the Middle East, India and Africa.

Nearly a quarter of board members and senior managers say they are aware of questionable revenue recognition practices in their businesses, and 42% say they have heard of some form of unethical conduct.